Digital marketplaces disrupt, transform and create markets to drive new business

Garry Jones, CEO of NovaFori shares his thoughts with Business Leader about how digital marketplaces are driving new business.

The digital transformation of business, work and lifestyle is one of the ongoing themes of the pandemic, but even amid all the stories of growth in e-commerce, corporate agility and working from home, the growth in scalable, cross-border B2B marketplaces driven by data science and state-of-the-art auction technology has stood out.

The B2B digital world has seen exponential growth in recent years, as companies increasingly recognise the benefits of digital marketplaces. Extended market reach, improved depth in pricing, and higher trade volumes are all features that make such marketplaces a compelling proposition.

So how and where are they being used? This article looks at three different examples from four very different industries – automotive, commodities, fine art and ESG – to show digital marketplaces in action and the benefits they bring to all the parties involved.

B2B digital marketplaces help mitigate automotive market disruption

Looking at the automotive sector, it’s one that has seen prices increase sharply during the pandemic for both second-hand and new cars amid a lack of car availability or supply chain disruption affecting production. In the UK, the average cost of a second-hand car has risen by about £3,000 during the past year, while in the US they are up almost 25% on the year. One outcome is that motorists are holding off on purchases.

However, online B2B marketplaces are now driving change in the second-hand car market, enabling greater competition and liquidity, wider distribution networks, and easier price discovery, as well as powerful data-driven recommendations that benefit buyers, sellers and marketplace owners alike. Operators of B2B marketplaces recognise that online marketplaces help to mitigate the impact of the shortages and disruption, loosening up the markets downstream that impact consumers.

Greater price discovery improves efficiency in the commodities sector

Moving on to the world of commodities, digital marketplace technology has a role to play there too, helping to bring efficiency, transparency and good practice to value chains, a key area of business that helps companies to create a competitive advantage.

Most businesses in, say, the mining sector deal with intermediaries or brokers to advise them on both sales and purchases at different points in the value chain. The intermediaries frequently supply materials directly or broker their supply. It’s a process mostly done in a traditional analogue way and one that can be very profitable for the intermediary.

Take, for example, rare earth metals that have no recognised public source of pricing, but are critical for the manufacture of mobile phones, computer chips, and rechargeable batteries. The lack of any tool for clear price discovery means that price spreads can be wide and the costs high – good for the intermediaries, but not necessarily the company involved.

The commodities sector is in many ways very advanced scientifically. Just look at the drought resistant seeds, low methane-inducing animal foodstuffs or very sophisticated technology used in mining as evidence of that. But the marketplaces haven’t moved in tandem, partly because more price transparency would narrow spreads and squeeze intermediaries’ margins.

As the world looks to ‘building back greener’ after Covid, digitising the multi-billion-dollar commodity value chain clearly has a part to play.

Global art markets buoyed by switching to digital

The art market is sometimes considered immune to change but is in fact doing just that: changing. It’s benefiting from a move to online auction platforms, along with the remarkable rise of NFTs (non-fungible tokens). It’s not just the new-fangled NFTs that are benefiting – physical art is too, as technology drives a new era of fine art and collectibles by uniting physical and digital in a way that supports both collectors and those who facilitate their sale.

Leading auction houses such as Christie’s are fully embracing online auctions, which helped them retain some form of business normality amid the pandemic. A report by Hiscox found that online art sales reached a record $6.8 billion in the first six months of 2021, up 72% year-on-year, and could hit a record-breaking $13.5 billion by the year end.^[1]

What’s more, not only has the transition opened up new geographical markets to auction houses and art sellers, but it has expanded the demographic of its customer base. Online auctions hold more appeal among younger people, for instance, who may be more inclined to use smartphones to attend. An estimated $3.1 billion, or 46%, of online art sales in the first half of 2021 were sold through mobile devices, according to Hiscox.

The most innovative auction platforms can secure incredibly useful data-driven insights which help them to make the most of the changing customer-base. In particular, those with machine learning functions can help auctioneers become attuned to the appetites of registered consumers based on their bidding history, recommending similar alternatives which customers will value.

Auction and trading technology to drive carbon trading

To further illustrate the versatility of marketplace technology, NovaFori is now working with Climate Impact X (CIX), a global marketplace and exchange for high-quality carbon credits, to deliver CIX’s mission to enhance the transparency, integrity and quality of carbon credits, with the aim of delivering tangible and lasting environmental impact.

CIX, established by DBS, SGX, Standard Chartered and Temasek, allows users to buy from a curated selection of premium carbon credit projects, catering to a broad range of corporates. The platform integrates NovaFori’s auction and trading technology with transparent environmental impact, risk and pricing data from market leading partners in the carbon credit space, to showcase verified high-quality carbon reduction and prevention projects and deliver an end-to-end solution for carbon credit trading.

As the world emerges from the pandemic, certain aspects of business have forever changes. In the automotive, commodities, fine art and ESG sectors, change is already underway. Other sectors as diverse as freight shipping, IPv4 block trading, capital markets, re-insurance and more are all moving forward in their digital strategies, as players leverage technology capable of offering enriched buyer and seller  experiences that drive their markets into the next era of digital transformation.